ABOUT THE  CAYMAN ISLANDS

The Cayman Islands consists of three islands: Grand Cayman, Cayman Brac and Little Cayman. The primary drivers in the economy are financial services and tourism, though the property development and construction sectors are also important supporting sectors as a result of the island's fast paced development.

The country has established itself as one of the world's leading international financial centres. The tourism sector benefits from friendly people, clean and safe surroundings and an excellent marine environment, which ranks the islands among the world's top three snorkelling and diving destinations.

Doing business in Cayman is facilitated by a modern infrastructure of telecommunications, roads and utilities. There are no property, capital gains or income taxes in the Cayman Islands. The country has enjoyed this tax free status throughout its entire history.

Regulatory Developments

Overall, Cayman has fared well with respect to the various initiatives over the past 2 years. The Cayman Islands received a favourable review by the OECD due its advancement commitment to the OECD and was not included on the OECD's list of tax havens. The Cayman Islands' commitment does not affect the country's status as a no tax jurisdiction.  

Cayman took the necessary steps to enhance its anti-money laundering regime and as a result was removed from the list of non-cooperating territories and countries (NCCT) produced by the Financial Action Task Force (FATF) and was also recently given another clean bill of health by the Caribbean Action Task Force (CFATF), based on a recent review of the Cayman Islands by the latter organisation.

The jurisdiction underwent a review of its regulatory framework by the International Monetary Fund recently. The IMF assessments relate to financial regulation and supervision in OFCs, including anti-money laundering and countering the financing of terrorism. The areas of focus are Banking and Insurance supervision, Companies and Trust Services regulatory and supervisory issues and the Securities sector including mutual funds and stock exchanges.

A detailed IMF review of the Cayman Islands was carried out against four key sets of international regulatory standards, namely the Basel Core Principles for Effective Banking Supervision, the IOSCO principles for the investments sector, the IAIS Principles for insurance regulation and the FATF 40 + 8 Recommendations which are recognized as the international standard in the combat against money laundering and financing of terrorism.

In a solid endorsement of Cayman’s high regulatory standards, the IMF report concluded that the Cayman Islands complied with every principle in the area of banking regulation, 25 of the relevant 26 principles for the investments sector, 11 out of 17 of the IAIS standards for insurance and all but two of the FATF’s 40 + 8 Recommendations.

Political Developments

One of the most significant political developments is the review of the Cayman Islands constitution which is currently being undertaken. This process is well in advanced stages with a recent revised draft being prepared by the UK in 2003. Among the expected changes to the political structure will be the introduction of a Chief Minister, which will place a single individual at the top of the political directorate, similar to that of a president or prime minister's role.

This arrangement differs significantly from the status quo, whereby governance is carried out by the Executive Council, comprising five ministers, three senior civil servants appointed by the Governor and the Governor. The other change is the introduction of a minister responsible for finance who will take over the responsibilities of the Financial Secretary.

In general, the island has politically matured, moving from a system which allowed teams and affiliations within the body of elected officials to a formal two party system comprising the United Democratic Party (UDP) and the People's Progressive Movement (PPM).

In May of 2005 the PPM won the General Elections with an overwhelming majority. The political climate in Cayman remains a very stable one, with government policies maintaining an environment which encourages investment and business incentives.